BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 493
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          ASSEMBLY THIRD READING
          AB 493 (Ruskin)
          As Amended June 1, 2007
          Majority vote 

           TRANSPORTATION      8-6         APPROPRIATIONS      12-5        
           
           ----------------------------------------------------------------- 
          |Ayes:|Nava, Carter, DeSaulnier, |Ayes:|Leno, Caballero, Davis,   |
          |     |Karnette, Portantino,     |     |DeSaulnier, Huffman,      |
          |     |Ruskin, Solorio, Lieber   |     |Karnette, Krekorian,      |
          |     |                          |     |Lieu, Ma, Nava, Solorio,  |
          |     |                          |     |Feuer                     |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Duvall, Galgiani,         |Nays:|Walters, Emmerson, La     |
          |     |Garrick, Horton, Houston, |     |Malfa, Nakanishi, Sharon  |
          |     |Huff                      |     |Runner                    |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Establishes the Clean Vehicle Incentive Program  
          (Program) as administered by the California Air Resources Board  
          (ARB).  Specifically,  this bill  :  

          1)Makes findings and declarations relative to greenhouse gas  
            emissions in California and how rebates and surcharges on the  
            purchase of new motor vehicles, specifically light- and  
            medium-duty passenger vehicles with a gross vehicle weight  
            rating of 10,000 pounds or less, could ultimately lead to the  
            purchase of cleaner vehicles as well as encourage  
            manufacturers to offer more low-emitting vehicles to  
            California consumers.  

          2)States legislative intent to establish a market-based Program  
            of one-time rebates, surcharges, or neither (zero-band) on the  
            purchase of new vehicles.  Also, the Program is to be  
            self-financing and not increase expenditures from or reduce  
            revenues in the state General Fund (GF).  

          3)Provides definitions to the following terms:  carbon dioxide  
            equivalent, criteria air pollutants, emergency vehicle,  
            greenhouse gases factor, greenhouse gases, motor vehicle,  
            vehicle, program, and zero-band.  









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          4)Requires a purchaser of a new motor vehicle eligible for a  
            rebate, to file a claim with the automobile dealer, who will  
            submit the rebate claim to the State Board of Equalization  
            (BOE).  

          5)Requires BOE to pay the rebate through electronic funds  
            transfer if so requested by the new vehicle purchaser.   
            Stipulates that no interest is to be paid on the rebate.   
            Requires BOE to make every reasonable effort to pay rebate  
            claims within 60 days of request.  

          6)Requires that dealers collect the surcharges from the new  
            motor vehicle purchaser and to submit the surcharge to BOE.  

          7)Requires ARB, no later than July 1, 2009, in consultation with  
            other agencies as appropriate, subsequent to at least two  
            public workshops, to develop regulations to implement the  
            Program.  Requires that the regulations establish a schedule  
            of rebates and surcharges to take effect July 1, 2010, and  
            applies to motor vehicles beginning with the 2011 model year.   
            Requires that the schedule of rebates and surcharges to be  
            adjusted annually and take effect on January 1 of each  
            subsequent year, as applied to new vehicles of that model  
            year.  

          8)Requires ARB to calculate, using a linear scale, the rebate or  
            surcharge based on the vehicle's emissions of greenhouse  
            gases, compared to the emissions of all vehicles of the  same  
            model year that are subject to the Program.  Allows for  
            adjustments to the calculations based upon emissions of  
            contributory pollutants and emissions of criteria air  
            pollutants.  

          9)Requires the establishment of a zero-band that reflects 20-25%  
            of a fleet of a given model that will neither receive a rebate  
            nor a surcharge.  The zero-band is to be adjusted to ensure  
            that buyers have a variety of vehicles among various types,  
            including light trucks, that are not assessed a surcharge.   
            Requires ARB to consider sales-weighted data in determining  
            the placement of the zero-band.  

          10)Establishes maximum amounts of the rebates and surcharges to  
            be not less than $2,250 or more than $2,500.  No surcharge is  
            to exceed the amount of the sales tax on the vehicle purchase  








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            price.  

          11)Establishes a minimum limit on the surcharge or rebate at  
            $100.  Any vehicle with an estimated surcharge or rebate of  
            less than $100 is to be placed in the zero-band.  

          12)Requires ARB to make annual adjustments to the applied  
            rebates and surcharges that will ensure that the surcharges  
            are sufficient to cover the cost of implementing the Program,  
            including administrative costs incurred by any state agency.   
            Requires, a reserve of 15% of the estimated rebates.  

          13)Authorizes the Department of Finance (DOF) to direct ARB to  
            adjust the schedule of rebates and surcharges to maintain an  
            adequate balance in the Clean Vehicle Incentive Account  
            (Account) and requires ARB to make any adjustments to the  
            schedule as directed.  

          14)Restricts adjustments to the schedule of rebates and  
            surcharges no more than once per model year.  

          15)Authorizes ARB, in consultation with BOE, to delay the first  
            year of Program implementation by enacting the rebate portion  
            of the Program up to 60 days after the surcharge element of  
            the Program is implemented.  

          16)Requires that the rebate or surcharge apply at the point of  
            sale at the price of the vehicle after the relevant taxes are  
            applied, not including the addition of sales taxes.  

          17) Establishes surcharge requirements for persons purchasing a  
            vehicle outside of the state.  Requires ARB, BOE, and the  
            Department of Motor Vehicles (DMV) to cooperate to develop  
            procedures for out-of-state purchases.  Establishes that a  
            person purchasing a vehicle outside the state is not eligible  
            for a rebate.  

          18)Applies Program requirements upon eligible vehicles leased  
            for more than one year, as specified.  

          19)Requires BOE to collect the surcharges and to pay all rebates  
            and refunds of surcharges.  

          20)Requires ARB, by May 10, 2010, to communicate with the  








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            public, including information to be posted on its Web site,  
            the surcharges and rebates on vehicles in the Program.   
            Requires ARB to provide information to licensed automobile  
            dealers and consumers on relevant details of the Program.   
            Authorizes ARB to modify information on the Program on air  
            pollution labels that are displayed on new vehicles.  Requires  
            automobile dealers to clearly display the amount of the  
            surcharge or rebate on vehicles available for sale.  Requires  
            ARB to incorporate a public education campaign as described.  

          21)Establishes surcharge exemptions for:  

             a)   Emergency vehicles purchased by any local agency;  

             b)   Vehicles purchased by microbusinesses for work-related  
               purposes;  

             c)   Paratransit and other vehicles used to transport persons  
               with disabilities; 
             
             d)   Vans purchased for the purpose of vanpooling; and,  

             e)   Vehicles purchased by very low income residents of the  
               state, as defined by BOE.  
               
          22)Exempts diesel powered vehicles from the provisions of this  
            bill.  

          23)Provides recourse to a purchaser who believes the vehicle  
            should be exempt from the Program.  Requires BOE to make  
            available to automobile dealers and vehicle purchasers  
            applications for purchasers seeking reimbursement from the  
            surcharge.  

          24)Establishes the Account administered by ARB, in consultation  
            with BOE, and directs that surcharges collected be deposited  
            into the Account.  Authorizes moneys in the Account to be  
            continuously appropriated without regard to fiscal year.   
            Authorizes payments from the Account for rebates, refunds, and  
            reimbursement of costs to BOE, ARB, State Controller's Office,  
            and DMV.  

          25)Authorizes DOF to transfer $1.5 million from the Vehicle  
            Inspection and Repair Fund (Repair Fund), into the Account,  








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            for initial Program startup.  Requires that any loan from the  
            Repair Fund is repaid with interest from the Account by June  
            30, 2011.  

          26)Authorizes ARB to collect information from motor vehicle  
            manufacturers to calculate a vehicle's emissions of greenhouse  
            gases.  

          27)Requires ARB to determine how to account for alternative  
            fueled vehicles in the surcharge and rebate calculations.   
            Authorizes ARB to develop procedures for surcharge refunds if  
            an approved alternative fuel conversion device is installed on  
            the vehicle within six months of purchase.  

          28)Requires ARB to consider "upstream emissions" or emissions of  
            global warming gases that occur during the extraction,  
            refining, transport, and local distribution of motor vehicle  
            fuels, in the promulgation of implementing regulations.  

          29)Requires ARB, in consultation with BOE, to submit a report to  
            the Legislature no later than January 1, 2013, and every three  
            years thereafter, on the following:  

             a)   Describes the Program's effectiveness;  

             b)   Identifies any adjustments made to the schedule of  
               rebates and surcharges and the reasons for the adjustments;  
                and,  

             c)   Recommends any changes needed to enhance the Program.  

           EXISTING LAW  :  

          1)Assigns responsibility for regulating vehicular emissions to  
            ARB and authorizes it to adopt and implement motor vehicle  
            emission standards and specifications.  

          2)Requires ARB to regulate greenhouse gas emissions emitted by  
            passenger vehicles and light-duty trucks to achieve maximum  
            feasible reductions.  Requires ARB, not later than July 1,  
            2007, to rename labels for model year 2009 and subsequent  
            model year motor vehicles, information on the emissions of  
            global warming gases.  









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          3)Requires ARB, on or before July 1, 2007, to adopt a list of  
            discrete early action emission reduction measures that can be  
            achieved prior to the adoption of market-based compliance  
            mechanisms and other measures and limits under the provisions  
            of AB 32 (Nunez and Pavley), Chapter 488, Statutes of 2006.   
            Requires ARB, on or before January 1, 2010, to adopt and  
            enforce those measures on the adopted list.  

          4)Authorizes the DMV to register vehicles and license drivers in  
            the state.  

          5)Establishes and charges the BOE with tax administration and  
            fee collection in the state.  The areas of authority of BOE  
            fall into four broad areas: sales and use taxes, property  
            taxes, special taxes, and acting as an appellate body for  
            franchise and income tax appeals (which are collected by the  
            Franchise Tax Board).  

           FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee:

          1)Moderate one-time GF costs, about $150,000 in 2007-08 and  
            $700,000 in 2008-09, to ARB to develop Program regulations and  
            to establish the process for imposing and refunding surcharges  
            and paying rebates.  These costs are not covered by revenue  
            generated by surcharges because they would not yet be in  
            place.  DOF would be authorized to loan up to $1.5 million  
            from the Repair Fund to the Account for Program  
            implementation.  

          2)Moderate ongoing costs, about $180,000 annually starting  
            2009-10, to ARB to administer the Program, adjust the schedule  
            of rebates and surcharges to reflect changes in the relative  
            emissions among all makes and models of new motor vehicles,  
            and to process buyer claims related to surcharges.  

          3)Moderate one-time costs, about $1.5 million in 2009-10, to BOE  
            to develop the process for  collecting surcharges from  
            dealers, depositing this revenue into the Account, and making  
            rebate payments from the Account.  

          4)Substantial ongoing costs, about $1 million starting in  
            2010-11, to BOE to collect surcharge revenue from dealers,  
            make rebate payments, and maintain the 15% reserve in the  








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            Account.  

          5)Minor ongoing costs, perhaps $130,000 annually starting  
            2010-11, to DMV to collect and process surcharges paid by  
            persons who purchased their vehicles out-of-state and brought  
            them into California for use.  

          6)Substantial revenues, up to $660 million in 2010-11 and $880  
            million annually thereafter, to the Account generated by  
            surcharges imposed on some new car buyers.  This revenue is  
            lower in 2010-11 because less than one year's worth of revenue  
            will be received by BOE within the first fiscal year.  

          7)Substantial payments, up to $513 million in 2010-11 and $555  
            million annually thereafter, from the Account to make rebate  
            payments and surcharge refunds.  

           COMMENTS  :  

          1)According to the sponsor, the Union of Concerned Scientists,  
            they are seeking to establish a program that reduces vehicle  
            emissions while protecting consumer choice.  Thus, they  
            envision funding an incentive for buying clean and efficient  
            vehicles by imposing a surcharge on dirtier, less efficient  
            ones.  They indicate that "Transportation is by far the  
            largest source of global warming pollution in California,  
            accounting for more than 40% of the state's heat-trapping  
            emissions.  There are over 20 million passenger vehicles on  
            the road in California, and approximately 1.7 million new  
            passenger cars and light-duty trucks are purchased each year.   
            Even with existing vehicle regulations, the bulk of global  
            warming emissions in California are expected to continue to  
            come from cars and trucks."  

            The sponsor further indicates that "Californians have  
            demonstrated widespread and consistent enthusiasm for clean  
            vehicle solutions, such as the Clean Car Discount program, to  
            reduce global warming pollution.  According to a 2006 poll,  
            82% of California voters support giving rebates for the  
            purchase of clean vehicles and 62% support placing a one-time  
            surcharge on high-polluting new vehicles.  Overall, 60% of  
            registered voters support the Clean Car Discount program, with  
            an overwhelming majority from every region, income level, and  
            political affiliation indicating support."  








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          2)Also, as indicated on the ARB Web site, there are a number of  
            existing government and private programs that provide monetary  
            incentives to enhance the marketability of cleaner vehicles.   
            This bill would lead toward the establishment of another  
            incentive program.  

          3)Writing in opposition, the California Motor Car Dealers  
            Association indicates that "new vehicles offered for sale in  
            California are the cleanest in the world and achieve better  
            fuel economy than most used vehicles? Slapping a surcharge on  
            new trucks and Sport Utility Vehicles (SUVs) that are  
            currently required under federal law to meet Corporate Average  
            Fuel Economy (CAFE) standards of 22.2 miles per gallon, will  
            encourage consumers to buy or continue driving used vehicles  
            that emit higher amounts of greenhouse gas.  A $2,500  
            surcharge on a new 2011 model year SUV will act as a huge  
            incentive to buy a used 2010 or older model of the same  
            vehicle."  The association further states that "this bill  
            would hit low and middle income Californians the hardest.  It  
            is a regressive tax that discriminates."  

            The Alliance of Automobile Manufacturers indicates that "this  
            bill is profoundly unfair.  Audaciously, it exempts the State  
            (and others) from the surcharge imposed on California  
            consumers.  However, no allowance is made for small business  
            people, large families, or other Californians who may require  
            larger vehicles.  As importantly, there is no recognition that  
            a large vehicle may be driven very few miles while a smaller  
            vehicle may be driven very many miles.  There is no effort to  
            correlate actual emissions with the surcharge or rebates."  


           Analysis Prepared by  :   Ed Imai / TRANS. / (916) 319-2093 


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